Archive for ND&S Updates

ND&S Weekly Commentary 9.27.21 – Fall Is Upon Us

September 27, 2021 

Halloween came early this year with investors spooked by one of China’s real estate developers, Evergrande, warning of defaulting on its bonds. Investors received a treat from “the man behind the screen” Federal Reserve Chairman, Jerome Powell, who decided to hold off on tapering the Fed’s asset purchases and made favorable comments about the sustained strength of the economy. As a result, the financial markets fluctuated throughout the week, ending the week in positive territory.

For the week the S&P 500 closed up 0.52%, the Dow Jones Industrials Average gained 0.62% and the tech-heavy Nasdaq rose 0.03%. International equities were weak with developed markets (MSCI EAFE) down 0.26% and emerging markets (MSCI EM) declining 1.01%. U.S. Treasuries fell last week as concerns about inflation, labor and supply shortages and the haggling over increasing the federal debt limit weighed on the bond market. The yield on the 10 year U.S. Treasury increased from 1.37% to 1.45%. Gold closed at $1,747 virtually unchanged and the price of oil (WTI) closed at $73.98/bbl up $1.97, near a 3 year high.

China’s regulatory pressures continued to affect stocks and cryptocurrencies as the People’s Bank of China issued a statement barring domestic and overseas financial institutions from providing cryptocurrency transactions. Cryptocurrency prices have and will be very volatile until regulatory risks are better understood. On the economic front, the hawkish Fed comments were surprisingly welcomed by investors and was seen as confirmation that the economy was able to stand on its own without the tremendous liquidity provided by the Fed. The nearest headwind is Congress passing legislation to fund the government to prevent a shutdown by September 30.

In economic reports released last week, new home sales rose 1.5% last month, above the 1% consensus to a seasonally adjusted annualized rate of 740,000. The U.S. unemployment number for the previous week was 351,000, slightly higher than the estimate of 335,000. At the end of July, job openings were at a record high of 10.9 million, which has greatly added stress to labor costs and productivity. This week’s economic reports will include durable and capital goods orders, S&P Case-Shiller home price index (year over year), consumer confidence, pending home sales, employment and core inflation.

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You don’t buy what is popular and do well.” –Warren Buffet

ND&S Weekly Commentary 9.20.21 – Markets Pulled Back Again – Seasonal Weakness

September 20, 2021 

Markets pulled back last week as investors navigate what is a seasonally weak period for the markets.

For the week, the S&P 500 declined 0.54% while the DJIA was down fractionally (0.05%). The tech-heavy Nasdaq was off 0.46%. The lone bright spot was small-cap US companies as the Russell 2000 increased 0.45%. International markets struggled last week with developed markets (MSCI EAFE) down 1.38% and emerging markets (MSCI EM) off 2.19%. Bonds were flat on the week as the yield curve was virtually unchanged. The 10yr U.S. Treasury increased 2bps to close at a yield of 1.37%. Gold closed at $1,756/oz. – down 2.25% on the week. Oil (WTI) closed at $71.96/bbl., marking an increase of 3.23%.

Investors continue to debate the transient nature of inflation. The U.S. Labor Statistics reported the Consumer Price Index (CPI) increased 0.3% in August following a 0.5% advance in July. Over the last 12 months, the CPI has increased 5.3%. In other economic releases, industrial production increased 0.4% in August missing estimates of a 0.5% increase. Retail and food-service sales advanced 0.7% in August, well ahead of a forecasted decline of 0.7%. This week, the FOMC will hold their September meeting where they will debate the unwinding of the extraordinary support they have given the economy since the pandemic struck 18 months ago. No action is expected at the conclusion of this meeting, but most economists assume they will begin tapering their $120 billion of monthly bond purchases later this fall.

Markets seem to be in the midst of a little consolidation phase while looking for the next catalyst. Major averages have been relatively quiet but there have been quite a bit of cross currents racing below the surface. The cyclical sectors, namely Materials, Industrials, and Energy started off 2021 strong but are flat to down since April. Info. Technology, Communication Services, Health Care and Real Estate are all up double digits during the same time period. Markets should remain a bit choppy until earnings reports begin in early October.

We continue to suggest that investors position portfolios with a slight defensive bias close to their long-term target asset allocations. Markets could be a bit volatile over the next few weeks … hang in there!

“Our attitude toward life determines life’s attitude towards us.” – John N. Mitchell

Weekly Commentary (9/13/21) – Markets Take a Breather

September 13, 2021 

Markets pulled back during last week’s holiday-shortened sessions with all four days posting moderate declines. Despite the pullback, markets are still close to all-time highs.

For the week, the DJIA lost 2.15% while the S&P 500 gave back 1.69%. The tech-heavy Nasdaq finished the week lower by 1.61%. International markets also finished in the red. For the week, the All Country World Index ex-USA was a bit better than domestic performance, but still finished lower by 0.50% while emerging market equities (MSCI EM) were also down 0.50%. Small company stocks, represented by the Russell 2000, were weak as they closed lower by 2.81%. Fixed income, represented by the Bloomberg/Barclays Aggregate, was flat as it eked out a gain of 0.02% for the week as yields moved slightly higher. As a result, the 10 YR US Treasury closed at a yield of 1.35% (up 2 bps from the previous week’s closing yield of ~1.33%). Gold prices closed at $1,789.60/oz. – down 2.26% on the week. Oil prices jumped 0.62% last week to close at $69.72 per barrel.

It was a relatively slow week for macroeconomic data. On Thursday, the Department of Labor reported that initial jobless claims for the week ending September 4 were a pandemic-low 310,000 – a decrease of 35,000 from the previous week and better than the 335,000 consensus. These numbers seem to indicate that there has not been a rise in layoffs due to the Delta variant. On Friday, the U.S. Bureau of Labor Statistics (BLS) reported that the seasonally adjusted Producer Price Index (PPI) for final demand jumped 0.7% in August – higher than expectations for a 0.6% increase. August’s year-over-year increase in the PPI was 8.3% – the highest on record. Core PPI advanced only 0.3%, below consensus of 0.6%. Supply constraints are quite clear in August’s price increases as demand remains relatively strong.

September is the only calendar month with a negative return for the Dow Jones Industrial Average over the last 100 years (the median return for the S&P 500 in September for the last 25 years is slightly positive). A few big historical events have certainly weighed on September average returns – the Great Depression, the 1974 bear market, the 2001-2002 bear market and the 2008 global financial crisis. Of course, past returns do not predict future returns. Volatility should pick up over the next few weeks as Washington struggles with stimulus packages and tax reform. We continue to suggest that investors stay close to their long-term target asset allocations with a slight defensive bias. Enjoy the last weeks of summer!

“In the sacrifice of first responders and the mutual aid of strangers, in the solidarity of grief and grace, the actions of an enemy revealed the spirit of the people. And we were proud of our wounded nation.”President George W. Bush